Oil cautious on rise in US drilling, Iran sanctions opposition

CNBC

Oil prices edged lower on Monday.

A relentless rise in U.S. drilling activity points to increased output.

Reuters

Andrew Cullen | Reuters

An oil pumpjack operates near Williston, North Dakota.

Oil prices edged lower on Monday as a relentless rise in U.S. drilling activity points to increased output, while resistance emerged in Europe and Asia to U.S. sanctions against major crude exporter Iran.

Still, crude prices were near more than three-year-highs reached last week as markets expect Iran’s oil exports to fall significantly once U.S. sanctions bite later this year.

Brent crude futures, the international benchmark for oil prices, were at $77.07 per barrel at 0010 GMT, down 5 cents from their last close.

“Around a million barrels of oil a day is likely to disappear from global oil markets if the U.S. sanctions on Iran bite,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

“But it is still far from certain that they will bite in the way intended…Germany has said it will protect its companies from U.S. sanctions, Iran has said French oil giant Total has yet to pull out of its fields and all the while it seems the Chinese are ready to fill the void created by the U.S.,” he said.

Markets were also held in check by a rise in U.S. drilling for new oil production.

U.S. drillers added 10 oil rigs in the week to May 11, bringing the total count to 844, the highest level since March 2015, energy services firm Baker Hughes said on Friday.